Is India Harnessing its Demographic Dividend?

India, now the world's most populous nation with over 1.4 billion people, stands at a crucial juncture. With 65% of its population in 15-59 yrs age group, and a median age of 28yrs, the nation is poised to reap the benefits of a demographic dividend – the economic growth potential resulting from a period where the working-age population surpasses the dependent population. 

When the working age is taken as 15-59 years¹, the dependency ratio² of less than two-thirds (67 per cent) is considered advantageous, and the demographic dividend accrues (as per UNFPA). This dividend, which started in 2011 for India, is expected to peak around 2041 as per Economic Survey of India 2018-19. It presents a significant opportunity for economic growth. A larger workforce can lead to increased savings, investments, and consumption, fuelling economic progress. A smaller dependency ratio and increased disposable income will drive higher consumption across various categories.

Brands need to understand the impact of this demographic shift on consumption and spending patterns, and how it will impact their category – this is not just about understanding the historic trends, but observing holistic patterns, looking at how other countries have progressed through their period of demographic dividend, and be better prepared for the future. The rise of nuclear families has led to an increase in per capita spending.  Younger decision-makers in these households are more influenced by lifestyle considerations and aspirational needs. Indian consumers are price-conscious yet increasingly drawn to premium products and experiences.  Brands need to balance affordability with aspirational offerings as consumers trade up to higher-quality products. Marketers need to track consumer aspirations- each income segment will have its own aspirations. The definition itself is undergoing change. 

At a macro level, this demographic advantage is not without its challenges. India faces the daunting task of creating enough jobs for its burgeoning workforce. In 2024, youth accounted for 83% of the country's unemployed. Skill gaps further exacerbate the problem - the ILO's 2023 report indicates that 47% of Indian workers are underqualified for their jobs.

To fully capitalize on its demographic dividend, India must prioritize investments in education, healthcare, and skill development. Promoting entrepreneurship, business-friendly policies, and labour market reforms are crucial for job creation. Addressing social issues, such as gender disparities, and improving health and nutrition outcomes are equally important. A subnational approach is necessary to address regional disparities in fertility rates. By addressing these challenges, India can harness its demographic potential and transform its growing population into a powerful engine for economic growth.

1.To be noted as per Indian Labour Laws working age starts at 18yrs, but given the high numbers of unorganised and traditional sector employment, starting at the age of 15 years, other sources of employment numbers in the Indian context like the UNFPA, PLFS, etc. tracks the employment figures from 15-60 years

2. Dependency ratio is the ratio of the population of young (0-14 years) and old (60+ years) to the population in working ages (15-59 years), usually expressed in percentage terms (as per UNFPA)